Last year, the price of one Bitcoin was worth $13,132 CDN.

According to #Coinbase, the price of one #Bitcoin is now worth $41, 140 CDN as of July 2nd 2021.

If you happen to be wondering what caused Bitcoin’s value to spike 2.5 times during a 12 month – pandemic environment or you are wondering if you should now add Bitcoin to your own portfolio, you are going to enjoy this week’s article. Let’s get started!

It is important to recognize that cryptocurrency technology is gaining more acceptance all over the world and the popularity of Bitcoin has surged so much that even governments cannot ignore it.

How do governments view Bitcoin #technology?

Most governments around the world have been in denial about the rise and popularity of cryptocurrencies which is why if you ask most economists or central bank representatives, you will consistently hear them say that Bitcoin is a medium of exchange and storage of value but is not a currency.

Many of these opinions might be based on the concern that #cryptocurrencies can take away power from their respective states. Today, a government has fiat powers meaning they can create as much money as they want. In case of cryptocurrencies such as Bitcoin, there is a limited supply, and the price is determined by the market it trades. In other words, Bitcoin’s price is determined by how much someone is willing to pay for it.

It is worth mentioning that Bitcoin has been gaining momentum for many years and back in 2017, Japan’s Financial Services #Agency officially recognized 11 companies as registered cryptocurrency #exchange operators. In April of 2018, it passed a law recognizing bitcoin as legal tender.

The recognition from the world’s 3rd largest economy and Asia’s largest economy has been very beneficial for the value of this currency. A large portion of the rise can be attributed to the rising demand in Asia which was a direct result of this formal recognition by the Japanese government. Fast-forward to 2021, and you now have publicly traded companies like #Tesla and Micro Strategy adding Bitcoin to their own balance sheets.

Many of these opinions might be based on the concern that cryptocurrencies can take away power from their respective states. Today, a government has fiat powers meaning they can create as much money as they want. In case of cryptocurrencies such as Bitcoin, there is a limited supply, and the price is determined by the market it trades. In other words, Bitcoin’s price is determined by how much someone is willing to pay for it.

What is driving the price of Bitcoin?

In my opinion, there are 3 main factors that are driving the bitcoin price. First, the media #frenzy around the latest boom in the #digital currency has drawn in speculative buyers. Second, the involvement of traditional money managers which is now creating opportunities for investors to add the cryptocurrency to their #TFSA, RRSP or other retirement savings vehicles. And finally, large companies like Tesla and Micro Strategy are viewing the digital asset as a protection against #inflation.

What is this week’s takeaway?

If you want to diversify your portfolio and have almost zero #correlation to stocks, bonds and real estate, Bitcoin is certainly worth the consideration. If you can hold Bitcoin in your RRSP or TFSA for the long term, you can squeeze out the extreme volatility excuse that is probably preventing many investors from buying the surging commodity.

A starting point could be adding 1% to a maximum of 5% of Bitcoin to your portfolio’s asset allocation strategy. This approach might be enough to give investors the benefit of diversification without risking their whole portfolio.

Have a great weekend!

Talk soon,

Michael Zagari